Beyond Financial Inclusion: Financial Health as a Global Framework

While the core financial health framework translates across borders, there are important distinctions and constraints that influenced the creation of the indicators. And while exogenous factors are important in the U.S., we found them to be uniquely important in the developing world. The global financial health framework consists of six primary indicators, used to measure consumer financial health, as well as four contextual factors that are important to consider in the developing world:

Financial Health Indicators for the Developing World

A consumer in the developing world is financially healthy when he or she:

1. Balances income and expenses
2. Builds and maintains reserves
3. Manages existing debts and has access to potential resources
4. Plans and prioritizes
5. Manages and recovers from financial shocks
6. Uses an effective range of financial tools

Four Key Factors in Understanding Financial Health in the Developing World

A consumer’s financial health is significantly influenced by his or her:

1. Absolute income level
2. Income and expense volatility
3. Social network
4. Financial role

Financial health as a concept has garnered traction within the U.S., and is gaining momentum globally. Such a framework can push the financial inclusion conversation forward, helping shape policy, direct donor and government resources, and contribute to the high-quality design of financial services. More work must be done to create instruments for accurate measurement. There is a role for researchers, financial services providers, and policymakers in supporting the creation of more nuanced infrastructure from which to build out a more tactical and actionable framework. However, preliminary research suggests a powerful and profound parallel between the financial lives of consumers in the U.S. and abroad.